First Startup from Avalon-GSK Deal Raises $10M for Celiac Disease

A collaboration formed earlier this year between San Diego’s Avalon Ventures and GlaxoSmithKline (NYSE: GSK) has hatched its first startup.

Avalon partner Jay Lichter says the company, Sitari Pharmaceuticals, was recently established with $10 million in Series A financing, provided under the Avalon-GSK partnership, to develop new treatments for celiac disease. Under their innovative collaboration, Avalon and GSK also will provide R&D support to screen compounds that could be used to target an enzyme that is believed to play a central role in celiac disease.

Celiac disease is a hereditary autoimmune disorder in which people cannot eat gluten (a protein found in wheat, rye, and barley) because it damages their small intestine. It is estimated to affect one in 100 people worldwide, or roughly 70 million people.

In a statement today, Avalon says it also has established a new independent pharmaceutical business, COI Pharmaceuticals, to accelerate the launch of Sitari and other Avalon-backed startups. COI is a “community of innovation,” Avalon partner Jay Lichter said in a telephone interview.

“It’s really very different,” said Lichter, who also serves as CEO of COI Pharmaceuticals. “It’s an unconventional life sciences collaboration of super smart people” that can be shared among Avalon’s clutch of biotech startups. The 25 scientists and biotech leaders employed by the Avalon-owned business “are coming together in a unique way that will be more efficient than anything else that’s around,” Lichter said. “When you have 25 people, the benefits are so much better than when you’re the three or four founders in a biotech startup.”

Sitari Pharmaceuticals, for example, would hire COI scientists to help to validate the human protein Transglutaminase 2 (TG2) as the right drug target for celiac’s disease, Lichter said.

The lab of Stanford University’s Chaitan Khosla has identified the TG2 pathway as a key trigger in the autoimmune response of celiac patients. The reaction unleashes antibodies that attack the small intestine, damaging the small fingerlike projections known as villi, so nutrients cannot be absorbed into the body. Khosla is a scientific founder of Sitari, which has licensed intellectual property from his lab.

Sitari also would work with COI and GSK to screen compounds that would bind with the TG2 protein (preventing its activity), using GSK’s enormous library of compounds, Lichter said.

COI Pharmaceuticals also is providing operational support to four Avalon portfolio companies: Afraxis; Avelas Biosciences, RQx Pharmaceuticals; and Sova Pharmaceuticals. Afraxis and RQx Pharmaceuticals are working to develop technology that was not part of buyouts that took place earlier this year.

The GSK-Avalon partnership, announced in April, has drawn wide interest for pioneering a new approach to starting and funding early stage biotechs. Under their partnership, GSK agreed to provide as much as $465 million to fund as many as 10 biotech startups to be established by Avalon over the next three years. Avalon, which has offices in San Diego and Boston, agreed to put up as much as $30 million under their unusual partnership. Avalon’s key role, though, is in identifying key breakthroughs in biomedical research and starting new companies to commercialize those technologies. Avalon will recruit the business and scientific leaders, and GSK has an exclusive option to acquire each company once it generates a clinical drug candidate.

Today’s statement includes a comment from Pearl Huang, who leads discovery partnerships with academia at GSK. “Our collaboration with Avalon Ventures is off to a great start, and we are impressed with the quality of opportunities and the speed with which we have been able to create the first new company using this unconventional collaborative approach,” she said.